Deal Terms
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Quick Answer
The current standard Y Combinator SAFE where the valuation cap represents the post-money valuation including the SAFE investment, making ownership percentage calculations straightforward.
The Post-Money SAFE (Simple Agreement for Future Equity) is the current standard version of Y Combinator's SAFE instrument, introduced in 2018 to replace the original pre-money SAFE. The key innovation is that the valuation cap represents the company's valuation after including the SAFE investment itself, making ownership calculations transparent and deterministic. Under a post-money SAFE, the investor's ownership percentage is simply their investment amount divided by the valuation cap—a $500,000 investment on a $5 million post-money cap equals exactly 10%. This clarity was a significant improvement over pre-money SAFEs, where ownership depended on the total amount raised across all SAFEs (which founders might not know until the round closed). The post-money SAFE also introduced the concept of the 'SAFE Preferred Stock' conversion class and updated MFN provisions. However, the post-money structure means that each additional SAFE sold dilutes only the founders and existing shareholders, not previous SAFE holders—a subtlety that can lead to unexpected dilution for founders who raise multiple post-money SAFEs.
In Practice
A founder raises three post-money SAFEs: $500K at $5M cap (10%), $300K at $5M cap (6%), and $200K at $5M cap (4%). Total SAFE ownership is 20% at conversion. Under pre-money SAFEs at the same $5M cap, the ownership would have been $1M / ($5M + $1M) = 16.7%. The post-money structure results in 20% dilution vs. 16.7%, because each SAFE's ownership is calculated independently against the same post-money cap. Founders raising multiple SAFEs should be aware of this compounding dilution effect.
Why It Matters
The post-money SAFE is the dominant early-stage fundraising instrument. Founders must understand that unlike pre-money instruments, each additional post-money SAFE dilutes only the founders, not prior SAFE holders. This means raising $2M across multiple SAFEs at a $10M post-money cap gives away exactly 20%—simple math, but the compounding dilution can surprise founders who do not model it.
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The Post-Money SAFE (Simple Agreement for Future Equity) is the current standard version of Y Combinator's SAFE instrument, introduced in 2018 to replace the original pre-money SAFE.
Understanding SAFE Post-Money is critical for founders navigating the fundraising process. It directly impacts deal terms, valuation, and the relationship between founders and investors.
SAFE Post-Money falls under the deal-terms category in venture capital. This area covers concepts related to the financial and legal terms that define investment agreements.
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